Tax on 'Cadillac' health-insurance plans will really hurt middle class and working poor

The Cadillac tax on high-cost health insurance plans was slipped into Obamacare legislation as a way to raise revenue. As the name suggests, the scheme was supposed to tax high-income Americans with upscale health insurance plans. In reality, the tax will be much more of a burden on the middle class and working poor than on the top 1 percent.

The tax, which is scheduled to go into effect in 2020, slaps employers with a 40 percent levy on health insurance plans valued at more than $10,800 for individual coverage and $29,100 for family plans. When lawmakers concocted the tax, those thresholds would’ve applied to only a small number of Americans.

In the years since, however, regulations, the increasing cost of health care and a lack of competition have caused insurance prices to skyrocket. To make matters worse, Congress didn’t bother to factor in inflation or cost of living into the cost limits. Lawmakers also count the cost of employer-sponsored health initiatives like on-site medical clinics, employee assistance programs, addiction treatment and wellness programs towards the threshold.

Ben Cunningham, a well-known anti-tax advocate in Nashville, is launching a referendum effort aimed at capping Metro's debt at its current level. If approved, this could complicate Mayor Megan Barry's hopes for a $6B regional transit plan.
Tuesday April 18, 2017, in Nashville, TN
(Photo: Larry McCormack / The Tennessean)

As a result, even modest workplace health plans will soon fall victim to the Cadillac tax.

The rising cost of health insurance and increasing out-of-pocket expenses as a result of the tax will hit American workers squarely in the wallet. It’s estimated that a family of four earning $100,000 a year will pay an additional $3,451 annually as a result of the Cadillac tax. A family of four earning less than $42,000 will shell out $1,261 more per year for health care.

Here in the Volunteer State, 3.1 million Tennessean who rely on workplace-sponsored health care coverage will face higher deductibles, a smaller network of doctors and higher premiums as employers are forced to shift the expense of the Cadillac tax to workers. In some cases, employers could be forced to cancel programs designed to help people struggling with opioid addiction, mental health issues, weight loss or smoking cessation. In other cases, health coverage may be scrapped altogether.

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The Cadillac tax is expected to be particularly costly to workers at many of Tennessee’s largest employers, such as Nissan, Cracker Barrel, Kroger, FedEx, AutoZone, Unum, Walmart, Bridgestone and Eastman Chemical.

Since employers plan their benefits packages up to two years in advance, some companies are already bracing for the implementation of the Cadillac tax by raising employees’ costs for health insurance plans and thinning benefits.

Fortunately, there’s still an opportunity for Congress to reverse the Cadillac tax before it’s too late.

More than half of the members of the House of Representatives have signed on as co-sponsors of a bill that would fully repeal the tax, including 127 Democrats and 93 Republicans.

That kind of broad-based support of eliminating the Cadillac tax shouldn’t be surprising. A recent poll by Public Opinion Strategies found that 79 percent of Republicans and 56 percent of Democrats oppose the tax.

Clearly, the House has listened to the American people and is ready to drive the Cadillac tax to the junkyard. Now it’s up to senators like Lamar Alexander and Bob Corker to stand up for workers and their families and scrap the tax. If the Senate fails to act, Tennesseans will soon end up paying a lot more money for worse health coverage.

Ben Cunningham is president of the Nashville Tea Party and the founder of Tennessee Tax Revolt.